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  #1  
Old 08-11-2010, 01:58 PM
larryace's Avatar
larryace larryace is offline
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Default Royalties

Can anyone here explain to me how royalties work?
I am assuming that you have to be the song writer to get them, or be credited with the writing, but I have a ton of questions.
For starters:
How are royalties collected? Take radio for example. Does somebody go through all the playlists and write checks to who? The publishing company? Do they get a cut too? Then they pay you? What is a typical payday for 1 play on a radio station? Does internet radio follow the same rules?

Who's checking for dishonesty?

What about jukeboxes that play CD's? Unverifiable, right?
Are total royalty payments across the board going down, or maintaining compared to say the 70's, before the digital age changed everything?

The only source of royalties that I can think of is radio, terrestrial, internet or satelite. What are any other sources of royalties?

Also, I heard once that after a song is 50 years old, it's public domain. (Or 50 years after the death of the artist, I heard that too) Is any of this true?

If I wrote a #1 hit song that was on the charts for say 8 weeks, am I (modestly) set for life? Or is that way off?

Basically I'm clueless. If anyone here could go into great detail about royalties, I would really appreciate it. It's a big mystery to me.

Thanks.
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  #2  
Old 08-11-2010, 03:11 PM
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BrewBillfold BrewBillfold is offline
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Default Re: Royalties

I receive money from royalties and much of it is still a mystery to me. The most thorough "standard explanation" you can get of this is from a text on the business and legal aspects of music (something like This Business of Music). However, it's doubtful just how closely the system works to the theoretical stuff you'll see in those texts. A lot of questionable and shady things still seem to occur with royalties. A lot of what's a mess about it seems unintentional to me--simply wonky reporting systems, a lot of disorganization, etc. Some of what's questionable--and of course shady--about it is intentional.

There are royalties from album sales and there are publishing (songwriting) royalties. If you're an artist who is under contract with a record company--so a solo artist, a member of a band, etc., your contract is going to specify some royalty rate you receive from sales of your album. When you're just starting out, the rate is going to be low, and after the record company deducts all of their expenses and recoups their advance, you might not have much money to show for it, if anything. There have been instances of bands whose first album or two did okay sales-wise who ended up still owing the record company money after that.

If I recall correctly, Angel is an example of a band that finished the game in the hole to their record company (Casablanca), even though they had 7 albums and were moderately successful financially at one point.

It's a complex issue, as in the past, there have been many cases of record companies intentionally screwing over artists financially, and artists ALWAYS think that's happening when they know they had some sales yet they are barely (or not at all) seeing any money, but there really are a lot of expenses that record companies incur getting an album on the market and (hopefully) trying to promote it, and they also need to pay their employees and try to make some profit.

Anyway, you'll make more money if you were credited as a songwriter, too, as you'll also be due publishing royalties from the album. And that fact has caused some dissent in some bands--even to an extent where it's broken some bands up, since some guys are making more money from album sales than others, and it can obviously be debatable just who contributed to writing songs--songwriters in rock bands do not typically come up with everyone's part, especially not drum parts. Coming up with a drum part is writing a drum part, which is part of the song, obviously, and sometimes a very crucial part of a song. It's important to square those issues away early in a band's life. It's usually one of the things I go over before I join a band, or before we even play a note if I'm the one doing the hiring. I prefer a democratic approach, where the whole band is credited with writing all the songs. If it's a band, I see it as a team in the most "noble" sense of that term--all for one and one for all--so that everyone would be contributing, working for the good of the band above all else, and there's no good reason to have some people in the band making more money than others. That can only cause problems--just like if you're working in an office and you find out that other folks doing the same kind of job are making a lot more than you are.

For both of these things, if you've instead done work in a "work-for-hire" capacity--for example, you were a session musician on someone's album, then you're not going to see any royalties (in the vast majority of cases, anyway). You'll instead have been hired for a flat fee or an hourly rate. I've done a lot of work-for-hire gigs in my career. You're not typically going to make a ton of money from those gigs, although you can definitely be comfortable as long as you can keep working and you're getting decent gigs (or working for crazy producers who keep you hanging around even though you're going to be due triple scale, etc.) . . . I've never had any royalty arrangements in a work-for-hire capacity, but I have heard of some people having them.

The part that's the bigger mystery to me, although I vaguely recall having more knowledge of it in the past, is how the radio play, etc. systems work. I know that the general gist of it is that radio stations, and ostensibly public jukebox owners, club owners, etc. are supposed to make periodic payments to BMI and ASCAP. Then BMI and ASCAP figure out who is supposed to get what publishing royalties and pays you--your check from those royalties comes from BMI or ASCAP (depending on your publishing setup). I don't recall how they figure out who is actually getting "air time". I think that at this point, radio stations are supposed to report their actual playlists to BMI and ASCAP, but there's a lot that can go wrong, either accidentally or intentionally, in that system. If I recall correctly, for public jukeboxes, they were randomly surveyed and formulas were based on that, but I don't know how much they even bother with that any longer. Theoretically, club owners are supposed to also make payments to BMI and ASCAP for both songs that DJs play and cover songs that bands play (which is one reason why some clubs only wanted bands doing original music), but especially in the latter case, I don't think anyone has really bothered with it in a long time. Those aspects of the business seem to be the biggest mess, in my opinion.

You can also make money, not just as a songwriter, although again you'll usually make extra as a songwriter, by licensing your music for various uses--films, advertising (TV commercials for example), video games, etc If it's the original recording that you're licensing, you're also producing more money for a record company in most cases, as they typically own the copyright on the sound recording (which is different than owning the copyright on the song itself). That they own copyrights on the sound recordings, by the way, is why you often see odd compilations hit the market all of a sudden--often long after the material was recorded. The record company is trying to milk some more money out of the sound recordings that they own. These can often be released without the artists even being aware of it.

As for copyright expiration, the current law is that works remained copyrighted for 70 years after the death of the longest surviving author. There are ways to renew copyrights beyond that, however, but I do not understand that so well (and neither do I need to worry about it--usually it's folks who are the heirs to your estate who would worry about it).

Can you be comfortable indefinitely from just one big hit? In my experience and understanding, almost definitely not. For one, if you've only had one big hit, you wouldn't have been under contract to any record company for very long, so your royalty rate would have been low, and a lot of what you made probably went to pay the record company back. Heck, even Lady Gaga claimed not too long ago that she hasn't made that much money from music yet. I believe her, for the reasons I mentioned above. Also, even though she's sold plenty of concert tickets, she's had big productions that cost a lot of money to do. She'll probably only become rich from music if she remains close to the level that she's attained for at least a few more years. You could possibly see periodic income from one big hit, especially if it's being licensed for other uses, but it probably wouldn't be enough to live comfortably on for any length of time.

Unfortunately, I've not been a part of any big hits, but I know and have known enough people who have been. Just for one example, one person I've worked with before was in a band who had a number of big hits in the late 60s, the band has been very well regarded since then for the most part, so they still regularly sell albums, their music is still regularly licensed, he's had a decent solo career, he kept performing live (and still does) since then, etc., and when I worked with him the first time (in the mid 90s) he was only making about 30-35k per year--that was his total income, from his then-current activities plus what he was getting from royalties, licensing, etc. Some of the problem there might be bad contracts, and it's my understanding that that was a more common problem in the 60s and prior, but still, it was difficult to believe that that was this person's income (of course, maybe it really wasn't, but I didn't have a very good reason to disbelieve him). I've worked with him again a few times since then, but he hasn't talked about his income again, and it's not something I'd ask about.

I'm certainly no expert on this stuff, though--my understanding comes from trying to understand why I am getting paid what I am (or why I'm not getting paid at all) for music that I've performed and written.
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  #3  
Old 08-11-2010, 04:52 PM
Paul Quin Paul Quin is offline
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Default Re: Royalties

A hugely complex issue and one which would involve writing a book to answer. I will say that there is a lot of misunderstanding and, accordingly a lot of half-truths which dominate discussion of this area - some of them are contained in BrewBillFold's mostly excellent response.

I will try to explain briefly and in general terms. There are generally speaking two kinds of royalties which can be expected by a publishing musician. The first is perfomance royalties which relates to radio play and live play (usually by someone else) of your songs. The second are mechanical royalties which relate to the sale of the physical medium which contains your recording. Generally speaking royalty payments are reserved for the people who own the writing copyright for that song but there are exceptions related to the contract and agreement in existence at the time of the recording. In cases where the contract has been a union contract, royalties are often reserved for the musicians who play on the recording but may not have been a writer. While more modern record company agreements (due to the overall decline in sales) seek to obtain a right in the publishing (and therefore the royalties) the standard has traditionally been that royalty rights belong to the songwriter. Those royalty rates are set by statute and so while there is no doubt that traditional record deals screw the musicians (usually 85% to company - 15% to artist out of which the advance must be repaid), it is not usually because of the royalties.

Jukeboxes are supposed to pay a fee and are supposed to record the songs which have been played. The rate, however, is fractions of a penny per play and accordingly, it is not policed very well. The advent of digital jukeboxes which relate back to a central server has made the policing much easier.

Royalty payments are policed by the performance rights society with whom the copyright holder is registered. In the US that is usually ASCAP, BMI or SESAC and in the UK the PRS. The Harry Fox Agency (for a small percentage fee) will also act on your behalf to make sure that all that is due to you comes to you. I need to check the royalty rate for radio plays, but mechanical royalties are set at 9.5c per song on a CD (if that song is less than 5 minutes long). Payments are made by your performance rights society usually equally to the writers(s) and to the publisher (not always the same). This dates from the time when most recording artists were not writing their own songs. Often there are deals between the publisher and the writer which splits the 50% received by the publisher.

You can certainly make good money by writing a hit song but if you want to be set for life you would have to define what you mean by "hit." A song which charts in the US only and maybe goes top twenty. stays in the top twenty for four weeks and then dissapears never to be heard of again would still generate income for the writer of approximately $150,000. If, however, you had written "Every Breath You Take or a similar song which has sold worldwide and continues to sell and has been licensed many times for commercials, movies and TV then you could reasonable expect to receive - over the course of ten years - in excess of $10 million.

I Hope this helps a little! If you have specific questions which relate to your profession I would recommend that you pose those questions to an attorney. Feel free to give me a call or drop me a line, I would be happy to try to help.

Paul
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  #4  
Old 08-11-2010, 07:40 PM
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DrumEatDrum DrumEatDrum is offline
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Default Re: Royalties

Can't really add anything to answers, since they're spot on.

You can get royalties from just playing on album without song writing, but they are usually pretty darn small, and are only paid after the record company has recouped all their expenses. Which is why you see so many comments from artists like "well, we never made much money off our albums anyway".

The money is in song writing.

As set based off a hit song, it depends on how the contracts are written up, and who owns what, and how many people are set to take a percentage (managers, lawyers, other executives). Some people can write a hit song, and go broke because they signed bad contracts, others can live quite well off a moderate hit if they own all the publishing rights.

Classic examples are The Beatles, vs The Who vs Led Zepplin.

The Beatles were young and dumb, and signed away their publishing rights (which is why so many Beatles songs are used in adds, they can't stop the process). But they sold so many albums, they got rich anyway just for being on the album. But as rich as they became, they could have been 100 times richer had they singed better deals.

The Who weren't so dumb, but they were dumb enough to sign contracts that gave their managers a much bigger cut than normal. So despite their hits, they had to stay on the road more than other bands to keep from going broke, because their managers and lawyers got such a huge cut. Pete got a vast majority of the song writing credits, so he was always more set the rest of the band. John died near broke, because he didn't have the song writing income Pete had, but lived an extravagant lifestyle. Keith always had money problems, because he didn't have the income John Bonham had, and of course, he spent his money like water.

Led Zepplin learned from the other bands mistakes, and signed more reasonable deals. And thus had a lot more money in their bank accounts than the Who.
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  #5  
Old 08-11-2010, 07:44 PM
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DrumEatDrum DrumEatDrum is offline
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Default Re: Royalties

From the book "Bumping into Genius" by Danny Goldberg (who headed three different record lable, once managed Nirvana and Steve Nicks, and got his start doing PR for Led Zepplin).

Page 47-48
Quote:
"So in the mid-eighties, when CD's sold for $10, a new artist who got a 12 percent royatly would be credited with around $.60 per sale. Foreign sales in those days paid at a 50 percent of the US rate. By the late ninties, the international rate to US ratio was much higher.

So if a 12 percent artist got $50,000 to sign, and spent $275,000 to record, and sold one million copies in the US, and one million outside the US, they would have a gross royalty rate of $900,000. Record producers...typical got 3 percent, which in this example would be worth $225,000. After deduction of of the advance and recording costs, that would leave $350,000 in artists royalties paid to the band. Assuming a 4 member group, who paid a manager, lawyers, and a business manager a total of 25 percent, this would mean around $72,000 per member"
So a band sells 2 million copies, and nets roughly $72,000 for guy. And this is using 1980's numbers. Royalty rates were as low as 3% in the 60's to 14 to 20% in more modern times.

The real money is in publishing rights to the songs. ASCAP and BMI collect from the record companies, radio stations, TV, song books, and anywhere the songs are played and pays that to the song writer (or who ever owns the rights to the publishing).

Per the same book, the song writer(s) of the above album would make roughly another one million in publishing fees from the sale of the album, and then what ever from radio, music books, etc.
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  #6  
Old 08-11-2010, 07:46 PM
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DrumEatDrum DrumEatDrum is offline
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Default Re: Royalties

Another good read is "Hit Men: Power Brokers and Fast Money Inside the Music Business" by Fredric Dannen, where you'll read how many other costs are charged against that royalty rate, giving the people who play on the albums even less money than the above scenario.
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Old 08-11-2010, 08:27 PM
Peter Suttman Peter Suttman is offline
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Default Re: Royalties

I found this video to be a helpful and fairly easy to understand intro into royalties.
http://www.youtube.com/watch?v=CrAToJXh3RE
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Old 08-11-2010, 10:32 PM
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chathamight chathamight is offline
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Default Re: Royalties

i'm pretty sure the royalties that a performer receives having performed on a track, but not being the "owner" of the song are due to "neighbouring rights". they are relatively new compared to mechanical and ownership rights, which may be why payments are still not as large...the enforcing agency is relatively new.

anyway from what I understand, the way to go about collecting these royalties is to join the AFM .
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Old 08-11-2010, 11:09 PM
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Yo! Yo! is offline
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Default Re: Royalties

My old man made a few double bass drumming videos on Hot Licks back in the 80's.

When my folks divorced, my mom got 100% of said royalties from my dad (he kept everything else from signature sticks, equipment, and some albums, but as a journeyman drummer, my dad rarely saw writing royalties). Not only that, but since he wasn't on the album liner on a few of his bands, he'd literally be a hired gun paid to play.

Every quarter I see a check from hot licks that my mom gives to me and my twin sis to split, and we each see ab $50. It's peanuts really....

So yearly, hot licks pays us ab $400ish.
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Old 08-11-2010, 11:49 PM
toddbishop toddbishop is offline
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Default Re: Royalties

Ugh, this subject is just a world of hurt. BB and Paul's answers are good. Basically songwriters get royalties for play (see the long answers for what that entails), through organizations like ASCAP and BMI; they also get mechanical royalties for CDs manufactured, through the Harry Fox Office. Royalties from CD sales through major lables are subject to what some of the most Byzantine accounting practices this side of the film industry, and are usually negligible. There's also money from licensing tunes for TV and movie usage, which I believe is negotiated between parties and not handled by ASCAP/BMI/HFO. Good books are "All You Need To Know About The Music Business" and "This Business Of Music."

And here's something kind of interesting if you're wondering how the iTunes paradigm is working for artists.
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  #11  
Old 08-11-2010, 11:57 PM
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azrae1l azrae1l is offline
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Default Re: Royalties

i can't say much for the song writing and stuff but i do know radio stations are payed to play not pay to play. and it's not that much really, something like 5 cents a play per song but most of their money comes from advertising not song play.

most jukeboxes these days are internet or satalite feeds which you subscribe to a service you pay for each month just like satalite radio. the company providing the service is the ones that either get payed or pay for the music but i don't know which that is.

as far as the rest all i really know is everybody takes their cut first and the artist is the last to be paid and by that time your not looking at much. then you consider most of that money comes from record sales and thats not doing so good with the piracy and internet sharing.

so 1 #1 song for 8 weeks you might be set for the week, maybe the month. but i would doubt it would be a year let alone life.
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  #12  
Old 08-12-2010, 03:02 AM
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73Rogers 73Rogers is offline
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Default Re: Royalties

Here's an interesting piece about how the accounting process works.
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  #13  
Old 08-12-2010, 03:28 AM
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Yo! Yo! is offline
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Default Re: Royalties

This is also pretty informative ab contracts in general:

http://business.songstuff.com/articles.php?selected=78
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